Ex-Ferguson Marine shipyard bosses damaging lost orders and "highly irregular" actions of Scots ministers

They say that “exciting” projects, including key involvement in trying to deliver the first seagoing vehicle and passenger ferry which will be fuelled entirely by hydrogen and creating a fishing vessel factory, have been lost.

Under previous ownership, management say they had secured the opportunity to participate in future defence orders, had booked valuable orders for fishing and other vessels, and had created a lead position in hydrogen propulsion systems. They say all of these multi-million-pound opportunities have now been lost to the yard.

And they say the cost of completing two lifeline ferries is expected to be at least £241 million – nearly three times the original contract value.

READ MORE: Revealed: Court action plunges controversial state takeover of Ferguson Marine into chaos

Ministers have said they believe they were acting in the public interest in taking control of FMEL in August 2019, saving it from closure, rescuing more than 300 jobs, and ensuring that the two vessels under construction will be completed.

A report by MSPs into the procurement and delivery of the two vessels for the CalMac network slammed the process as a “catastrophic failure” last month.

Caledonian Maritime Assets Ltd – the taxpayer-funded company which buys and leases publicly-owned CalMac ships on behalf of the Scottish Government – awarded Ferguson’s, then owned by tycoon Jim McColl’s Clyde Blowers Capital, the £97m contract to build the ferries in 2015.

But the process was blighted by delays, a doubling of costs and a breakdown in relations between CMAL and shipyard bosses.

Officially further delays to MV Glen Sannox and Hull 802 mean that their delivery, after being due online in the first half of 2018, will be between four and five years late.

The Herald on Sunday revealed in August that ministers ensured there was a “right to buy” FMEL when it provided a £30m loan two years ago knowing it was creating a path to controversial state ownership.

Confidential documents revealed that the Scottish Government knew FMEL was in danger of financial collapse two years before it undertook a state takeover in December 2019 after the major shipbuilder finally fell into insolvency.

In a new monitoring analysis of life under state ownership, former management have raised serious concerns about how the last shipyard on the lower Clyde is being run under state ownership.

They say that in the first few weeks of nationalisation, engineering giant Babcock was announced as the successful consortium bidder for the £1.25 billion Royal Navy contract for five new Type 31e Frigates.

FMEL had been working closely with Babcock for three years as part of its consortium, a partnership that envisaged fabrication for selected hull blocks to be built by the yard.

This was a working partnership that could have seen the Port Glasgow yard with naval work for at least the next seven to eight years.

But the former management said that opportunity was lost through nationalisation.

They also say that since nationalisation, the FMEL team involved in HySeas III – which aimed to deliver the first seagoing vehicle and passenger ferry which will be fuelled entirely by hydrogen – was disbanded.

The HySeas III consortium was jointly led by FMEL and St Andrews University, and included partners from around Europe.

At the global GreenTech Awards 2019 in Berlin, the consortium represented by FMEL won the Innovation of the Year award for its work on a hydrogen propulsion system. After receiving this award management say the firm was inundated with enquiries about its hydrogen technology.

“Ferguson was seen as leading in this field with a fantastic opportunity to capitalise globally, not only in newbuild but in retrofit,” said the former management. “With shipping operators required to meet international emission reduction targets within the next 10 years, FMEL was set to be a leading player. It is apparent that there is likely to be sustained worldwide investment in hydrogen technology. There is a very large prospective market.

“Since nationalisation, this team has been disbanded and FMEL have dropped out of the consortium. Yet another huge opportunity lost for Scotland.”

First Minister Nicola Sturgeon during a visit to Ferguson Marine shipbuilders  to reveal that the firm is a preferred tenderer 

A project by FMEL to build a fishing boat factory at Riskend, adjacent to Inchgreen where vessels could be built, was also lost, they said.

Working closely with the Clyde Fishermen’s Association and Inverclyde Council, agreement was in place for FMEL to build a new fishing boat factory on the Inchgreen site, the fishing industry predicting that Brexit will result in an increase of over 30% in the size of the UK fishing fleet.

Depending on the initial investment this would allow for the production of up to 12 vessels at any one time.

READ MORE: Revealed: Ministers' secret path to the controversial state takeover of Ferguson Marine

“Since nationalisation, these plans have been abandoned. Another huge lost opportunity to Scotland. Another shameful waste,” said the former FMEL management.

“The prize here was huge, creating between 700-800 sustainable jobs and building a market-leading, commercial shipbuilding business in Scotland.”

Since nationalisation the company has also lost a significant number of “really talented” people, the former FMEL executives say.

“Star apprentices, talented young engineers, skilled tradesmen and a highly competent management team.

“FMEL had a very motivated workforce who became totally demotivated as a result of the chaos created by CMAL and the Government nationalisation of the yard. Before this everyone was working as productively as possible under extremely difficult circumstances,” they said.

The ex-management monitoring analysis which involved questioning workers within the yard states that the final design specification for both delayed veseels had not been clarified yet and the “uncertainty around some key aspects of the vessels are still not yet agreed”, with an expected impact on costs, schedule and quality.

Last week, Gordon Ross, managing director of Dunoon-based Western Ferries (Clyde), said his firm had successfully procured two of four vessels from Ferguson. But he also warned that commercial operators will now be “nervous” of ordering new vessels from Ferguson amid the ongoing fallout. “For a Holyrood report to use the word catastrophic is itself catastrophic. If you are a commercial shipbuilder, part of the contract of work process is technical ability and track record,” he said.

“There is diligence work done when it comes to placing orders. My concern is that the cost overruns and delays may create a real nervousness for commercial operators to place orders with Ferguson’s.”

In their 129-page report, MSPs called for a “root-and-branch overhaul” of the ferry procurement process, declaring that established procedures are “no longer fit for purpose”.

A secret deal to take over FMEL was hatched by the Scottish Government as FMEL executives lodged complaints just before the firm went under, saying ministers were not serious about keeping it afloat and were keeping them out of vital discussions.

Documents show that even two weeks before FMEL went into administration, directors thought ministers were still trying to pursue what they called “the solvent solution” involving keeping it intact as a private business while behind the scenes ministers had created a pathway to nationalisation.

After falling into administration in August last year, former FMEL managers subsequently accused the Scottish Government of having no serious intention of leaving it in private ownership while being warned nationalisation would be subject to EU state aid laws.

They accused ministers of forcing it into insolvency by rejecting a plan that would avoid any state aid claim, save the taxpayer at least £120m, and prevent the costs of building two key lifeline ferries soaring to over £230m.

And the former FMEL management have described the process to ensure the Scottish Government could nationalise as “highly secretive, highly irregular and unusual”.

They also said for ministers to ask to be appointed as managing agents of FMEL while in administration in return for agreeing to cover certain costs was also “highly unusual and irregular”.

“There has been no transparency of this agreement with the administrator, nor has there been any transparency so far on the cost of this arrangement during administration,” they said.

A Scottish Government spokesman said: “In the absence of a workable commercial solution the administrators of Ferguson’s concluded that the proposal by ministers to bring the yard into public ownership was the best option. By stepping into save the yard the Scottish Government saved the contracts and all of the jobs with a further 100 jobs created since then.”